Growth Effects of Government Expenditure and Taxation in Rich Countries: A Comment
Henry Ohlsson () and
Peter Skogman Thoursie ()
No 2003:14, Research Papers in Economics from Stockholm University, Department of Economics
In a recent article Stefan Fölster and Magnus Henrekson  argue that “…the more the econometric problems that are addressed, the more robust the relationship between government size and economic growth appears”. But in failing to control for simultaneity in a valid manner the regressions reported by Fölster/Henrekson are flawed. Moreover, using theoretically valid instruments we find that the estimated partial correlation between size of the public sector and economic growth is statistically insignificant and highly unstable across specifications. A policy-maker who wants to promote growth is well-advised to look for other evidence than cross-country growth regressions.
Keywords: Economic growth; public sector; cross-country regressions; panel regressions (search for similar items in EconPapers)
JEL-codes: E62 H20 H50 O57 (search for similar items in EconPapers)
Pages: 13 pages
New Economics Papers: this item is included in nep-pbe
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Journal Article: Growth effects of government expenditure and taxation in rich countries: A comment (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:sunrpe:2003_0014
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